SITE Job Market Seminar | Online cash register policy in Russia: Impact on firm profits and exit decisions
Job market paper: Online Cash Register Policy in Russia: Impact on Firm Profits and Exit Decisions
By: Evgeniya Dubinina
Abstract
To achieve better tax compliance, the Russian government required small firms to use online cash registers (OCRs) for business-to-consumer transactions from 2017. For firms, the installation of the OCR leads to an increase in fixed costs. This might push firms to switch to the shadow market (partially or fully), to exit the market, to report more costs and less profits, or to combine several strategies. Using the TWFE and Regression Discontinuity in Time techniques, I estimate the effects of the OCR policy on reported profits, profits tax, and firms' exit decisions. Exogenous variation for causal inference is possible thanks to different years of policy implementation (2017, 2018, 2019). At the regional level, I find that tax revenues increase. However, different treated firms pay taxes according to different tax regimes, and for some regimes there are no effects for tax revenues. At the firm level, I find that firms report less profits, profit tax, and VAT after policy implementation.
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